Any tax system must raise sufficient revenue to meet public priorities funded by the government. All these discussions about the urgent "need" for PST are smoke and mirrors - they are thrown on us to avoid the budget balancing questions why and how we are spending the public money.
Do we need to continue feeding the bloated and inefficient health care system by not challenging its bureaucracy and administration? Do we need to continue paying $500K/yr+ to doctors by maintaining artificial deficit of home-trained professionals? Do we need to keep paying educators more and keep class sizes comfortably low, as we move to educate our children through Google while teachers are browsing their Facebooks and texting in class? Do we need huge municipal government departments that are essentially duplicating private industry services at a substantial premium? It's much easier to tax consumption than properly addressing the above questions and causing unpopular and loud raucous in medical, educational and civil service unions.
Consumption taxes have generally negative effect on economy. They are tolerated and digested in jurisdictions where living attractions are stronger than aversion to spending more. If implemented in Alberta, PST would be a big mistake.
The points below are from the report titled ECONOMIC EFFECTS OF A FEDERAL GENERAL SALES TAX prepared in The Division of Tax Research Treasury Department by William J. Shultz in 1942! Most of the points are still valid today:
Quote:
2. Subsequent slackening of consumer purchasing, varying according to differing elasticity of demand for various commodities and services, results in production readjustments, thereby affecting costs of production and distribution, which in turn produce a new price pattern. Some lowering of business profits occurs in the course of this readjustment.
3. Manufacturers' excises, gross sales taxes and value added taxes are not likely to be embodied in price increases as promptly as retail sales taxes. A considerable part of their immediate impact is on business profit.
4. Eventually, like retail sales taxes, these other forms of sales taxation produce a new, higher pattern of prices, with some lowering of business profit.
5. Sales taxes imposed below the retail level involve an "interest loadage" to cover the working capital investment in tax payments not yet recovered from consumer purchase payments. This adds slightly to the price and profits effects of these taxes.
6. Manufacturers' excises and gross sales taxes, impose differing tax burdens on commodities and services according to their chains of production and distribution. These differing tax burdens cause these forms of sales taxes to modify the price, consumption and production patterns more than do retail sales taxes.
7. Gross sales taxes discriminate against single-process concerns in competition with integrated enterprises and thus promote vertical integration.
8. General sales taxes reduce consumption expenditure more and saving less than any other form of major-revenue tax.
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